UTI to move HC on HLL insider trading by Dec 7

MUMBAI, NOV 16: The Unit Trust of India UTI has said that it will file a writ petition within three weeks before the Mumbai High Court cha...

MUMBAI, NOV 16: The Unit Trust of India UTI has said that it will file a writ petition within three weeks before the Mumbai High Court challenging the Appellate Authority8217;s July 14 order which had struck down the Securities and Exchange Board of India SEBI directive to Hindutan Lever Ltd to compensate UTI with Rs 3.04 crore in the insider trading case.

During the hearing today, the division bench comprising chief justice M B Shah and justice S Radhakrishanan, the senior advocate for UTI, Ghulam Vahanvati, said the UTI would be filing its petition before December 7.

The council representing HLL had in the earlier hearing on September 28 argued that the penalty should be only Rs 5 lakh. At Monday8217;s hearing, Vahanvati said a meager sum of Rs 5 lakh would mean a gainful advantage of a few crores of rupees for the multinational.

In its September 28 hearing, the court while admitting the writ petition of SEBI, had suggested that UTI join the litigation as it was custodian of investors8217; funds. The courthad in the September 28 hearing stayed a part of the appellate authority8217;s order which held that SEBI lacked jurisdiction to award compensation and launch prosecution unless there was a 8220;conclusive determination8221; of all aspects of the alleged offence.

The court, meanwhile, dismissed a petition by the Investors8217; Grievances Forum IGF which challenged the order of Appellate Authority quashing a directive of SEBI to HLL for paying the compensation. The court felt that nothing survived in IGF8217;s petition in view of the court admitting a similar petition filed by the SEBI.

While admitting SEBI8217;s petition, the court had stayed the appellate authority8217;s order of July 14 last which held that SEBI had no powers to award compensation or direct prosecution of those guilty of insider trading. The court also stayed a portion of order which said that without final determination of issues no such orders could be passed by SEBI.

IGF had pleaded that because of non-disclosure of market sensitive information by HLLthat it was being merged with Broke Bond Lipton India Ltd BBLIL, UTI sold eight lakh shares of BBLIL to HLL without realising that such information would have direct nexus or bearing on price of these shares.

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It may be recalled that the SEBI had directed HLL to award a compensation of Rs 3.04 crore to UTI for the notional loss it suffered for selling eight lakh share of Brooke Bond Lipton India Ltd BBLIL to HLL prior to the merger announcement and thus in the absence of clarity on the price-sensitive issue. HLL had appealed against the SEBI order to the Appellate Authority which not only struck down the SEBI order, but also questioned UTI for its act in the matter.